Corruption trial exposes problems at East Bay anti-poverty agency

HAYWARD -- It was supposed to be Alameda County's voice of the poor, a grass-roots public agency rooted in President Lyndon B. Johnson's 1964 War on Poverty.

Presidents and anti-poverty programs changed, but for decades the Alameda County Associated Community Action Program, or ACAP, was an obscure mainstay distributing federal money to empower low-income residents.

Whistleblower complaints in 2011 ended that obscurity. Grainy video footage of the executive director and her husband carting away office files at 2 a.m. led to criminal charges.

Now, as the 50th anniversary of the War on Poverty approaches, a public corruption trial is unraveling the failings of the agency tasked to be its East Bay arm -- one of 1,000 like it around the country. Prosecutors from the Alameda County District Attorney's Office are portraying the breakdown as a clear case of theft by the former director, Nanette Dillard, and her husband and grants manager, Paul Daniels. However, the trial has exposed broader questions about how county and federal officials ignored years of budgetary red flags and allowed the agency to spiral into bankruptcy.

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A jury of eight men and four women at the Rene C. Davidson County Courthouse in Oakland for weeks has listened to public officials and former ACAP employees testifying about the suspected misuse of federal grant money: a fancy dinner at a rooftop Manhattan restaurant; therapeutic massages to reconcile differences between Dillard and her deputy director at the Claremont Hotel spa; a "reinvestment employment" work crew sent to fix up Dillard's El Cerrito home for less than what crew members apparently thought they should be paid; and money improperly shifted from one grant fund to another.

The couple has pleaded not guilty to grand theft, conspiracy to commit a crime, and crime by a public officer.

Their defense lawyers have sought to portray Dillard, hired as the agency's director in 2004, and Daniels as scapegoats for the county's dysfunctional finances and governance. One former ACAP business manager, Valerie Sanders, acknowledged under cross-examination this month that it was Alameda County's finance department, not Dillard, with ultimate say on some of the questionable transactions. And a federal worker, who oversaw ACAP's $500,000 grant to match the savings of low-income residents trying to buy a house or pay for education, said confusion over the grant requirements was commonplace around the country.

As the new year begins and the prosecution rests, defense attorneys will begin drilling in their message of shared blame by calling from a list of 72 witnesses, including several elected officials who served on the agency's governing board. The board rarely met in the years when the agency began running into trouble.

Coincidentally, just days before ACAP's problems emerged publicly in February 2011, President Barack Obama had proposed slashing in half its main reason for being, the $700 million federal Community Action Program -- one he said "I care deeply about" but needed improvement.

"The program has been awarding grants to agencies for the past thirty years based on a virtually unchanged formula that doesn't consider performance, and does not hold agencies accountable for outcomes," said a statement at the time from the White House budget office.

Anti-poverty advocates and Congress pushed back, and the federal grants were untouched. But it was too late for ACAP, which dissolved itself after firing Dillard.

Those who remember the origins of the Alameda County agency have mixed feelings about its legacy, sudden demise and the trial that has exposed its inner workings. From the beginning, the "community action" model was designed as an alternative to top-down federal welfare programs by allowing the local community, including a committee of low-income residents, to decide how the reinvestment money ought to be spent.

"The purpose was really to give people who were poor an extra leg up with extra education and so forth," said former Hayward Mayor Ilene Weinreb, who headed the agency's original board of governors in 1974. "It probably did some good. I don't think it did as much good as they hoped."

Though founded in 1974, ACAP was the successor to another economic development organization that formed to take advantage of the millions of dollars of grants created with the 1964 passage of the Johnson-backed Economic Opportunity Act. Management problems at that organization inspired Alameda County leaders to create a unique board led by the region's mayors and council members representing each participant city. They hired a founding director, Suret Dutia, who later went on to work in the Carter administration and for private foundations.

"It was really pretty fantastic what ACAP had accomplished during at least those six years when I was involved," Dutia said in an interview. "It was the hottest new entity. ... Of course, like everything else, what matters is leadership. We were incredibly successful in getting resources from many different sources."

Now, in the county only Oakland and Berkeley -- two cities that snubbed the countywide agency back in the 1960s and started their own -- still have a community action program, but Oakland's expanded in 2011 to fill some of ACAP's gaps and was renamed the Alameda County-Oakland Community Action Partnership.

Estelle Clemens, its director, said the mission of the nation's 1,000 community action agencies remains important -- and effective -- 50 years after Johnson launched his national anti-poverty campaign.

So it is too bad, Clemens added, that "if there's a problem, one bad apple, it spoils the whole bunch."